Greenlight sued the maker of iPhones and iPads to block a shareholder vote that includes a proposal, supported by management, to make it impossible for the Apple board to decide to issue preferred stock.

The hedge fund alleged that Apple violated US securities policies by "bundling" the proposal on preferred stock with two other shareholder-friendly measures.

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Doing so forces shareholders to accept or reject all three measures together, rather than separately, which Greenlight says violates a Securities and Exchange Commission rule.

More broadly, Greenlight argues that eliminating Apple's power to issue preferred shares would restrict Apple's ability to return value to shareholders.

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"Like many other shareholders, Greenlight is dissatisfied with Apple's capital allocation strategy," Greenlight founder David Einhorn wrote in a letter to Apple shareholders.

"The combination of Apple's low [and shrinking] price-to-earnings multiple and $US137 billion [and growing] hoard of cash on the balance sheet supports Greenlight's contention that Apple has an obligation to examine all options to create and unlock additional value," Einhorn said.

Greenlight is seeking to build support for its proposal that Apple issue a "perpetual preferred stock" that could carry, in Einhorn's suggestion, a four per cent dividend, allowing shareholders to better share in its idle cash pile.

Such a "more shareholder-friendly capital allocation policy", Einhorn said in the letter, "would unlock hundreds of dollars of value per share".

Greenlight said it has held discussions with Apple, but the company rejected the proposal "outright" in September last year.

Apple did not immediately respond to a request for comment.

The news of the legal action helped lift Apple's stock. At the close in New York, Apple shares had risen 3 per cent to $468.22.